Tariff bindings and bilateral cooperation on export cartels |
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| Institution: | 1. Yale University, United States;2. Chinese University of Hong Kong, Hong Kong;1. University of Georgia, Department of Agricultural and Applied Economics, 301 Conner Hall, Athens, GA 30602, United States;2. International Food Policy Research Institute, Environment and Production Technology Division, 2033 K St NW, Washington DC 20006, United States;3. University of California, Davis, Department of Agricultural and Resource Economics, One Shields Ave, Davis, CA 95616, United States;1. Department of Economics, Monash University, Clayton, VIC 3800, Australia;2. Department of Economics, University of Sydney, Sydney, NSW 2006, Australia |
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| Abstract: | Despite the negative international externalities that they generate, export cartels are legal in many countries. We use a repeated game approach to analyze cooperation between a low-income country (LIC) and its high-income country (HIC) trade partner where the HIC agrees to prevent its industry from organizing as an export cartel in return for a combination of improved market access (i.e. a tariff reduction) and a transfer from the LIC. If the LIC is subject to a tariff binding (say because of an existing trade agreement), the transfer it pays to the HIC increases and the scope for bilateral cooperation declines. |
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